Insurer Must Defend Insured In Alleged Organ-Harvesting Scheme

Nationwide Mutual Ins. Co. v. Garzone

(E.D. Penn, September 17, 2009)


In this declaratory judgment action, the insurer sought to have the court render a decision on whether or not it has a duty to defend and/or indemnify its policyholders, providers of crematory services, for underlying claims involving the policyholder’s selling of body parts for cash.  The underlying claims alleged that the policyholders either intentionally or by their negligence participated in a scheme to harvest organs of deceased individuals without the consent of the deceased or their families.  The policyholders then sold these organs to Biomedical Tissue Services through falsified documents.  All of the participants pled guilty in the criminal action. 


The case was heard by U.S. District Judge Michael M. Baylson, who refused to declare that allowing insurance coverage for participants in a body-parts-for-cash scheme would violate public policy.  In addition, Judge Baylson rejected the argument that guilty pleas by the participants had conclusively proven that all of the conduct was intentional and therefore could not be treated as negligent conduct that triggers insurance coverage.  Judge Baylson held that Pennsylvania courts have rejected the argument that allegations of negligence must be set aside after criminal convictions. 


Judge Baylson also rejected the insurer’s argument that the allegations of intentional conduct are more prevalent, holding that such a principle would limit an insurer’s obligations to defend.  In addition, there is no caselaw that establishes such a principle, which would permit insurance companies to avoid their contractual duties.  Instead, Judge Baylson found that his task was to carefully parse each of the lawsuits to determine whether they contained any negligence-based claims that would trigger coverage under the funeral home’s policies. 


For a copy of the decision click here


By Sarah X. Fang and Joseph A. Oliva